The government is considering a proposal to divest its entire stake in Jessop, its wholly-owned Calcutta-based sick public sector unit.

The top brass of Bharat Bhari Udyog Nigam Ltd, Jessop’s holding company, will meet on April 17 to take a final view on the matter.

Top BBUNL sources said the government was mulling the selloff of its entire stake, marking a shift from its earlier stand of divesting up to 74 per cent in Jessop.

“A merchant banker will be appointed at the April 17 meeting to handle the selloff,” sources said.

Several merchant bankers have been asked to make presentations before the company’s board. BBUNL is also weighing the option of looking for a joint venture partner if it fails to get a reasonable price for its entire stake in the engineering giant.

Manohar Joshi, Union minister of industry (heavy industries & public enterprises), who addressed a press conference here today, confirmed that the government was ready to divest its entire stake in some of the PSUs under the ministry of heavy industries.

“But,” he said, “it is difficult to find a suitable buyer for a loss-making unit.”

The Board for Industrial and Financial Reconstruction (BIFR) had drawn up a Rs 91.2 crore revival package for Jessop in April 1998. Its accumulated losses have mounted to over Rs 260 crore at a time when it has been starved of orders from the railways.

“We are known for manufacturing EMU coaches. But for the last couple of years we haven’t received a single order from the railways,” said Debashis Das, vice president, Jessop Officers’ Association. Das, however, said the company had recently received an order for 259 different types of wagons from the railways.

The company, which has a manpower of 3255, has also defaulted in depositing provident funds worth Rs 45 crore, he complained and added that the employees had not been paid salaries for the last four months.

Joshi said that 32 of the 48 PSUs were are making losses and only 16 were earning profits.

In West Bengal, Joshi said the situation was alarming with 12 of the 19 units falling sick and being referred to the BIFR.

The review committee for the 12 sick companies have recommended a joint venture for Cycle Corporation while the revival scheme for the National Instruments has been approved.

The committee has said the revival of Bharat Ophthalmic Glass can be looked into but it has left it to the government to decide the fate of the five “potentially sick” companies — Bharat Process & Mechanical, Weighbird, Mining and Allied Machinery Corporation, Tyre Corporation of India, and Rehabilitation Industries Corporation.

Joshi said the cabinet will take a decision on the fate of these five companies within a month.

The government was considering a four-pronged strategy for the 48 heavy industries including the preparation of revival schemes, financial restructuring, creation of joint ventures and manpower rationalisation.

Two weeks ago, the Union cabinet passed a voluntary separation scheme to give a fillip to the process of manpower rationalisation.

Joshi’s ministry has also asked for the expansion of the National Renewal Fund corpus to Rs 1000 crore which could be used to finance the voluntary separation schemes and for re-training people who opt for the scheme.

TEA BOARD TO DRAW UP NET AUCTION STRATEGY

BY SUTANUKA GHOSAL

Calcutta, April 8

The Tea Board of India has decided to work out a detailed plan on how to carry out tea auction on the internet.

Talking to The Telegraph, Tea Board chairman S.S. Ahuja said, “We are not against the idea of selling tea on the net. But there should be a proper framework for doing that. I would like to see that all the stakeholders in the tea industry benefit from the new auction system.”

He said a proper monitoring system should be there so that nobody in the industry was cheated. “I have already called the people who have launched teaauction.com to discuss with them in details,” Ahuja said.

The Tea Board chairman said several grey areas and problems remained unanswered in the idea of cyber-auction. These include assurances about credit facilities available from major auctioneers, assurance on quality from brokers and transparent payment mechanism.

“These things have to be sorted out first. We have to see that all these things have been ensured in the cyber-auction,” Ahuja added.

An overriding concern for promoters of on-line auctions will be to ensure a transparent payment mechanism for the seller apart from cast-iron guaranteed quality to the buyer.

It may be mentioned that at present about 55 per cent of the total production comes to the auction system, though according to the Tea Marketing Control Order around 75 per cent of production is required to come to the auction. Private sales account 45 per cent of the total production.

Ahuja said, “There are few private sales. But people till date rely on auctions. I do not think that normal auction will be affected due to introduction of cyber-auction.”`

Already the major auction houses have made a presentation before the Tea Board on how they would like to design the cyber-auction.

Meanwhile, the Sri Lankan and the Indian commerce ministry officials are expected to sit together to work out the mode of tea import from Sri Lanka under the compromise treaty. “The final mode of tea import will be decided this month only,” Ahuja said.

Tea will be imported under a fixed tariff preference of 50 per cent. Under the terms of the deal, the provision in the free trade pact for a three-year phaseout of the import duty have been dropped.

RUPEE HEDGING PLAN FLOUNDERS

BY OUR SPECIAL CORRESPONDENT

Calcutta, April 8

The Reserve Bank of India’s eight-month old instrument for domestic currency risk hedging has not yet enthused the corporate sector.

Hedging instruments like forward rate agreements (FRAs) are ideal for fixing interest rate cost on future borrowing with bankers while interest rate swaps are used to convert existing debt and liabilities from one basis to another—from a floating rate to a fixed interest rate—when a company feels the other option to be more advantageous.

One reason for companies not showing interest about the new instrument is that the RBI is quite strict about the use of interest rate swaps. In a circular to banks and financial as well as primary dealers in July last year, the central bank stated that while dealing with companies they should exercise due diligence to ensure that they (companies) are undertaking the FRA or the IRS only to hedge their own rupee balance sheet.

“The biggest hurdle to the development of such hedges for application purely in the domestic markets is the primacy which the RBI gives to exchange rate,” says S.Anand, senior vice president (Treasury), IDBI Bank. That being RBI’s primary goal, all other objectives are subservient to it, he said at a seminar organised by the Bengal Chamber of Commerce to popularise the risk management tools amongst its corporate members.

The BCCI seminar threw up some interesting issues on why the market for the hedging instrument—allowed by the RBI in June last year—was not growing as fast it had in other countries despite at least 10 banks, Indian and foreign, playing the role of active market makers.

Compared to the national inter-bank market of Rs 100-150 crore daily, quantum deals by companies with their banks have not picked up.

SUSPENSION OF WORK AT BURN STANDARD UNITS

BY A STAFF REPORTER

Calcutta, April 8

Burn Standard Ltd, a subsidiary of the Bharat Bhari Udyog Nigam Ltd, has ordered suspension of work in seven of its refractory manufacturing units with effect from April 1.

These units are based in Durgapur, Haldia, Ranigunj and Andal in West Bengal, Gulfarbari in Bihar, and Jabbalpur and Newar in Madhya Pradesh.

The suspension of work will affect around 700 workers in the company, which has been making heavy losses over the last few years for the want of orders both from the railways and steel sector.

Burn Standard Officers’ Association joint secretary, Anutosh Bondopadhyay said the company was not given orders even by the public sector enterprises since it has a negative networth.

“In many PSUs, we are not able to lift the tender form because of this problem,” he said.